Personalized Medicine Can Help Reshape the Pharma Financial Business Model

January 9th, 2013

Dr Christof Kölsch

When long-awaited Zelboraf was finally launched in Europe it was met not only with excitement and hope but with fear arising from its likely price tag. Christof Koelsch asks if personalized medicine is doomed because it is simply too expensive, or if there is still a way to reach the brilliant future it has for so long promised.

When the long-awaited new melanoma treatment Zelboraf (vemurafenib) was finally launched in Europe a few months ago [2012] it was met by a lot of excitement and hope. But there was also one big fear, which had nothing to do with the adverse events or other clinical considerations: Zelboraf’s likely price tag. In the Cancer Research Science Update blog, Henry Snowcroft wrote an entry under the headline ‘New melanoma drug goes on sale – but will it be affordable?’. He reviews the promise and the limitations of the new drug, finishing with a stern reminder that its price tag may well become the ‘be all or end all’ factor deciding this great new drug’s impact: “We recognise that everyone – even pharma giants – are feeling the effects of the recession. We do understand that the price of a drug reflects not just the cost of the trials to develop it, but the cost of failed trials of other drugs (…). And we recognise the vital role the pharmaceutical industry plays in shouldering the costs – and the risks – of large clinical trials. But too often in recent years, price has been a stumbling block in getting effective drugs to patients that need them. It would be deeply frustrating – for patients, for researchers, and for supporters who donate to charities like ours – to see this unhappy story being told yet again.”

And, indeed, it took six more months until at last Roche and the UK authorities reached an agreement that would see Roche offer an undisclosed, but likely substantial, rebate on the price of the drug charged to the NHS, in exchange for an official approval of the drug being used in melanoma patients in England (note that as of this writing [2013] the drug is still not covered in Scotland, Wales and Northern Ireland!).

So, where does that leave the great promise of personalized medicine? Zelboraf is a drug that, arguably, is a considerable step forward in the treatment of melanoma, if only in a specific patient population. If Roche with such a drug, offering substantial clinical superiority over existing treatments, faced major hurdles to reimbursement, for no other reason than the sheer inability of payers to afford providing access to the drug, how will its many peers and competitors waiting to launch more and more such high priced targeted therapies address such an increasingly difficult access and reimbursement environment? Are the golden days of personalized medicine over before they really started? Will personalized medicine be doomed in the end, not because of insurmountable scientific challenges, but because of it simply being too expensive to afford? Or is there a way out of this looming disaster that yesterday still looked like a brilliant future?

Diaceutics discusses these developments in our article, ‘Towards a Balanced Value Business Model for Personalized Medicine – An Outlook’ in the January 2013 issue of the journal Pharmacogenomics. In this article, we revisit the basic value drivers in the pharmaceuticals business, consider the shift from the traditional volume-driven, ‘one-size-fits-all’ blockbuster model towards the low volume/high price model followed by most personalized medicine launches over the past decade. We outline the challenges to the sustainability of this recent model, and propose a new Balanced Value business model for personalized medicine, leveraging the emerging opportunities to reduce drug development cost and time for targeted therapies, as illustrated in principle by the more recent launches of Xalkori and Zelboraf. We also outline the changes required within the pharmaceutical industry and, more broadly, the environment in which this industry operates, and illustrate critical success factors in implementing such a new model.

We strongly believe that our Balanced Value business model has a fundamental ability to not only contribute substantially to the continued success of the pharmaceutical industry in an increasingly challenging environment, but also offer a new and more sustainable equilibrium between the various stakeholders in health care. We look forward to you sharing your thoughts and comments on this subject and would be delighted to engage in a discussion with you, in order to further refine and validate our industry’s thinking about the promise of personalized medicine.

As Senior Vice President, Strategy & Innovation at Diaceutics Group, Christof combines his years of insight from working inside the pharmaceutical industry to bring a strategic perspective to all of Diaceutics’ client engagements. While directly involved in running and coordinating many of Diaceutics client programs, Christof is also responsible for providing clients a strategic, long-term PM perspective that goes beyond immediate project needs to consider how PM might be more broadly considered and implemented in the rapidly evolving health care landscape.

With over ten years experience in international health care and life sciences, Christof has worked very successfully with a wide range of large and mid-size pharma and biotech companies in Europe and the US on R&D, strategic marketing and corporate and business unit strategy. As a management consultant with Boston Consulting Group, Christof focused on portfolio management and business and organizational development initiatives. More recently, he was in charge of personalized medicine and biopharmaceuticals business strategy for oncology planning within the global strategic marketing group of GSK and led a number of strategic planning functions at GSK’s global vaccines headquarters near Brussels, Belgium.

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